History of bribes weighs on China's Sinovac as it speeds toward coronavirus vaccine

Its CEO was also bribing China's drug regulator for vaccine approvals during that time, court records show.

Sinovac is now seeking to supply its coronavirus vaccine to developing nations, from Brazil to Turkey to Indonesia. While graft and weak transparency have long plagued China's pharmaceutical industry, seldom has the reliability of a single drug vendor from the country mattered this much to the rest of the world.

Sinovac is one of China's two coronavirus-vaccine front-runners, with its clinical testing in the same final stage as Moderna's and Pfizer-BioNTech's. Domestically, Sinovac's vaccine is in second place, with state-owned Sinopharm's vaccines more widely administered under an emergency-use program. Another Chinese vaccine, developed by CanSino and a military research institute, is approved for emergency use by China's military.

Sinovac's vaccine, Coronavac, may end up adopted in a number of developing markets. Officials in Brazil and Indonesia - the most populous nations in Latin America and Southeast Asia - say Coronavac could be approved in coming weeks. In Brazil, São Paulo Gov. João Doria has called it the safest vaccine the country has tested.

Sinovac has not yet released efficacy data, making it unclear whether its vaccine can protect recipients as successfully as the vaccines from Moderna and Pfizer, which were more than 90% effective in preliminary analyses.

Sinovac has acknowledged the bribery case involving its CEO, saying in regulatory filings that he cooperated with prosecutors and was not charged. The CEO said in testimony he could not refuse demands for money from a regulatory official.

Sinovac has not been involved in safety scandals, and there is no evidence that any of the vaccines approved in cases involving bribery were faulty. But some medical experts say that extra scrutiny of Sinovac's drug claims is justified, given its record of moral flexibility.

"The fact that the company has a history of bribery casts a long shadow of doubt over its unpublished, non-peer-reviewed data claims about its vaccine," said Arthur Caplan, medical ethics division director at New York University Langone Medical Center. "Even in a plague, a company with a morally dubious track record has to be treated with great caution concerning its claims."

While Sinovac's history of bribery has raised concerns among investors of the Nasdaq-listed company, only in recent months has its record taken on such global implications. Governments are weighing the risks of new vaccines from companies like Sinovac against the certainty of more deaths if the pandemic continues.

A review of public records and trial testimonies by The Washington Post reflects that Sinovac's rise to the front ranks of China's vaccine industry took place with the help of priority projects from Beijing and kickbacks to officials who assisted in regulatory reviews and sales deals. A number of details from the court cases have not been reported previously, in part because of China's censored media.

In 2016 court testimony, Sinovac's founder and chief executive, Yin Weidong, admitted to giving more than $83,000 in bribes from 2002 to 2011 to a regulatory official overseeing vaccine reviews, Yin Hongzhang, and his wife. Yin Hongzhang confessed to expediting Sinovac's vaccine certifications in return.

Those years corresponded to Sinovac's breakout period, when the biotech start-up founded in 2001 was handpicked by Beijing officials to lead development of vaccines for SARS, avian flu and swine flu.

Yin Hongzhang, who shares a surname with Sinovac's CEO but is no relation, was sentenced in 2017 to a decade in prison for taking bribes from Sinovac and seven other companies. Sinovac's Yin Weidong, now 56, was not charged and continues to oversee the company's coronavirus-vaccine drive this year.

For Sinovac, that case was not a one-off: At least 20 government officials and hospital administrators across five provinces admitted in court to taking bribes from Sinovac employees between 2008 and 2016.

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Sinovac said in 2017 it had launched an internal investigation in response to the bribery cases. It has yet to announce the investigation's result.

In its latest annual report, released in April, Sinovac said that Yin Weidong "was not charged with any offense or improper conduct and he cooperated as a witness with the procuratorate. To our knowledge, the Chinese authorities have not commenced any legal proceedings or government inquiries against Mr. Yin."

The annual report said that Sinovac maintained strict anti-corruption policies but that "these policies may not be completely effective."

In a statement to The Post, a Sinovac spokesman said the company had entrusted the legal system to handle the past bribery cases appropriately. He said the CEO's ability to do his work was unaffected. Sinovac did not make Yin Weidong available for an interview.

Corruption in China's pharmaceutical industry is a long-running scourge. Dali Yang, a University of Chicago political scientist, said China's shift from decentralized drug approvals in the 1990s to centralized reviews in the 2000s created opportunities for graft.

But corruption is no longer as rampant as it once was, after several high-profile crackdowns sparked by drug-safety scandals, Yang said. In 2007, China executed Zheng Xiaoyu, the former head of the State Food and Drug Administration, in a grim warning to the industry. China's President Xi Jinping launched another broad anti-corruption drive in 2012.

Vaccine mishaps continued to occur in recent years. In 2018, Sinovac's larger rival Sinopharm recalled 400,000 shots of diphtheria, tetanus and pertussis vaccines for substandard quality.

In a Beijing court in 2016, Yin Hongzhang, the former deputy director of the China Food and Drug Administration's drug-testing center, said Sinovac's Yin Weidong gave him cash bribes over nine years as he sought regulatory approval for the company's vaccines for hepatitis A, SARS, avian flu, foot-and-mouth disease and influenza A.

In exchange, Yin Hongzhang said he helped "accelerate the approval process" for Sinovac's vaccines.

Sinovac's CEO said in his testimony that he "could not refuse" requests from a regulator.

Peter Humphrey, a British corporate investigator who has probed pharmaceutical corruption cases in China, called it "a bit extraordinary" that Sinovac emerged unscathed in 2017, despite its CEO confessing to bribery.

China previously punished only the party that accepted the bribes, he said, but this changed in 2014 with a case involving GlaxoSmithKline. GSK was fined $490 million for bribing doctors and officials to bolster sales, and its top China executive given a suspended prison sentence.

For Sinovac, the bribery cases have had little visible impact except to exacerbate an acrimonious shareholder struggle that has frozen trade of its stock on Nasdaq since February 2019. This ownership battle has taken dramatic turns, including a physical fight for the company seal - a stamp used by Chinese firms for legalizing documents - that Sinovac said resulted in a factory power outage and ruined vaccines. Sinovac has otherwise continued business as usual.

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In a 2012 interview with state-run China Youth Daily, Yin Weidong said that after a less-than-rigorous early education, he flunked his college entrance exam. He found his calling in a vocational epidemiology program: "I suddenly turned into the student asking the most questions in school."

A few years later at age 21, he was hailed as the first person in China to isolate the hepatitis A virus. He would spend the next decade and a half developing and testing his hepatitis A vaccine - China's first domestically developed one for the liver disease - before founding Sinovac in Beijing in 2001.

His big break came in April 2003: As SARS spread, Yin Weidong phoned municipal officials and volunteered to help develop a vaccine, according to the state-run Guangming Daily. Days later, China's Ministry of Science and Technology named him the leader for a national project to fast-track a SARS vaccine, with government funding and researchers at his assistance.

While the project fizzled out along with SARS, it gave Sinovac's team crucial practice in developing a vaccine for a coronavirus. As with this year's plan, the SARS vaccine plan called for production to begin before testing finished.

Sinovac also received Beijing's support for developing vaccines for avian flu and H1N1, with its team getting more experienced and faster.

When SARS hit, Sinovac's Yin Weidong had already been bribing regulator Yin Hongzhang for a year.

In his court confession, Yin Hongzhang said he mentioned to Yin Weidong in 2002 that he wanted to buy a car, drawing a $15,200 cash gift from the executive. That same year, Sinovac's first flagship product, the Healive hepatitis A vaccine, was approved for sale.

A few years later in 2006, Yin Weidong gave Yin Hongzhang and his wife $7,600 in cash, saying it was to help them furnish their new apartment, according to testimony by Yin Hongzhang's wife. Yin Weidong said in testimony that when he was invited to their newly furnished home months later, he gave them another $15,200 in cash, which he expensed.

During that period, Sinovac gained approvals to sell influenza, avian flu and swine flu vaccines in China. Sinovac's swine flu vaccine was approved for sale in China just half a year after the virus was detected in Mexico.

In 2011, Yin Hongzhang asked Yin Weidong to lend him around $45,600 to buy a villa on Beijing's northern outskirts, according to his testimony.

Yin Weidong said in court that he arranged the cash drop-off through an intermediary, wary of repercussions if he handled it personally.

Yin Hongzhang's wife, identified in court testimony only by her surname, Guo, told the court that she and her husband picked up the cash in a hotel lobby and never volunteered to repay the loan.

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At lower levels, at least 20 officials and hospital employees confessed in Chinese courts between 2015 and 2018 to taking bribes from Sinovac employees, according to the court judgments.

"In the vaccine industry, we usually give a commission to the person in charge to encourage them to use our vaccines," one Sinovac salesperson, identified only by the surname Yang, said in a 2017 case in the southern province of Guangdong.

Yang admitted to giving a hospital employee $2,441 in kickbacks - "always through envelopes of cash" - as a reward for the hospital purchasing 5,351 doses of Sinovac's hepatitis A vaccine from 2011 to 2015.

Caplan, the medical ethics professor, said Sinovac's history of bribery would alienate some potential customers. But some countries may still prefer Sinovac's vaccine, as it can be stored closer to room temperature than the ones from Pfizer-BioNTech and Moderna. And some may lack other options.

"When there are no options and you're in a plague, you tend to take what you can get," Caplan said. "Sketchy history or not."